FOR IMMEDIATE RELEASE AG
Monday, February 24, 1997 (202) 616-2765
TDD (202) 514-1888
DOJ AND HHS HIGHLIGHT LATEST EFFORTS TO
FIGHT FRAUD BY CLINICAL LABORATORIES
Operation "LabScam" Yields Big Results
Including Second Largest Health Care Fraud Settlement Ever
WASHINGTON, DC -- The federal government's fourth major case
targeting fraud by independent clinical laboratories has brought
the total amount recovered by laboratory enforcement initiatives
to more than $800 million and resulted in three corporate
criminal convictions, announced Attorney General Janet Reno and
Health and Human Services Inspector General June Gibbs Brown
today. Reno said that SmithKline Beecham Clinical Laboratories
(SBCL) today entered into the second largest health care fraud
settlement in history.
Brown also described new guidance issued by HHS today to
help independent clinical laboratories create compliance
programs.
The case against SBCL, which arose out of their performance
of clinical laboratory services for patients whose services are
paid for in whole or in part by the federal government, was
investigated and coordinated by the United States Attorney's
Office for the Eastern District of Pennsylvania. Under the
settlement, SBCL paid $325 million to resolve the civil
allegations. SBCL also committed to adopt a corporate compliance
agreement.
"Laboratory enforcement initiatives including LabScam have
recovered approximately $800 million and convicted three
corporations of criminal fraud," said Reno. "Now, all three
major independent laboratories are operating under extensive
corporate integrity agreements that are designed to prevent the
abuse from occurring again."
Brown said that the enforcement efforts of the past four
years had led to a substantial reform in the laboratory industry
and broken new ground in terms of voluntary corporate compliance,
even absent corporate integrity agreements.
"Today we are unveiling the first of several compliance
plans that are intended to help health care providers doing
business with the Federal Government to better protect their own
operations and the Medicare and Medicaid programs against fraud
and abuse," Brown said. "From my perspective, the adoption of a
compliance plan is an affirmative step toward promoting a high
level of ethical and lawful corporate conduct and preventing
future scams."
Health and Human Services Secretary Donna Shalala said
LabScam is a "clear success story" and vowed continued
commitment. "When I took office more than four years ago, I set
a policy of zero tolerance' for health care fraud and abuse and
made it a top priority," said Shalala. "We will continue to work
with the Department of Justice to put an end to this kind of
payment fraud that robs our health system and our taxpayers."
Reno stressed that while voluntary compliance was the
expectation and goal of the federal government, investigations
and prosecutions would continue to be important tools.
"We expect businesses to take these steps on their own
initiative, before any unlawful conduct occurs. But to medical
laboratories who ignore this advice, our warning is clear -- we
will bring the full weight of the federal government's powers to
bear to enforce the law and protect the American people from
being ripped off."
Operation LabScam
Operation LabScam was launched following the Federal
Government's 1992 prosecution of National Health Laboratories,
Inc. (NHL) for submitting false claims to the Government. During
the course of the two-year investigation of NHL, it became
apparent to government attorneys and investigators that other
companies in the laboratory industry were engaged in the same or
similar practices, which included billing Medicare for millions
of unnecessary tests, while misleading the physicians who
purportedly "ordered" the tests into thinking that the tests
would be performed for free.
Shortly after the NHL settlement, the Department formed a
working group of federal and state investigators, and civil and
criminal prosecutors. LabScam operated under three simple
tenets:
full investigations of the laboratories to address any and all
violations of civil and/or criminal laws;
centralized, focussed audit work with the cooperation of HCFA,
and;
coordination among DOJ, U.S. Attorneys Offices, Medicaid Fraud
Control Units, investigative agencies, and federal benefits
programs.
HHS simultaneously issued Inspector General subpoenas to a
number of national clinical laboratories whom the working group
had reason to believe were engaged in the same kind of marketing
and billing scheme to which NHL had just pled guilty. The
companies targeted included some of the largest independent
clinical laboratories in the country. SmithKline is the third
major laboratory case brought under the LabScam Initiative.
On October 10, 1996, Damon Clinical Laboratories, Inc. pled
guilty in Boston federal court to conspiracy to defraud Medicare
and pay $119 million in criminal fines and a civil settlement.
Damon's then-parent corporation, Corning, Inc., also agreed to
enter into a revised corporate integrity agreement.
On November 21, 1996, Allied Clinical Laboratories, San
Diego Regional Lab, pled guilty to submitting false claims to
Medicare and Medi-Cal, and Roche Biomedical Laboratories agreed
to enter into a pretrial diversion program. Their successor
corporation, Laboratory Corporation of America, agreed to pay
$187 million in criminal fines and a civil settlement for conduct
by Allied Clinical Laboratories, Roche Biomedical Laboratories,
and National Health Laboratories. The Laboratory Corporation of
America also agreed to enter into a corporate integrity
agreement.
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